Should Capital Gains be Taxed

This was the headline on an article in the Press on Saturday (no on-line version that I can find). The sub- head says that the article reports on both sides of the debate. This is a bit of an obsession of mine (see my earlier posts, here, here, and here), as most of the arguments I have seen on this seem to be making incorrect partial-equilibrium arguments.

So I was keen to see what arguments would be put forward by the expert economists interviewed for this article. In a telling, but perhaps not surprising, commentary on the relevance of our profession for public policy, the number of economists cited in the article on either side of the issue was zero.

There was a quote from an Auckland professor of taxation law and policy to the effect that the absence of a capital gains tax causes "over-investment in property", but as I noted in the second of the posts linked to above, the chain of reasoning needed to get this conclusion is a lot more complicated than one might think, and the combined assumptions needed are somewhat heroic.

I continue to search for a coherent economist rationale for a CGT.

Christchurch redevelopment

The LibertariaNZ Party asked me to comment on policy surrounding the Christchurch rebuild; rather than using their party broadcast allocation for "Vote for me!" advertising, they're using it to highlight particular policy issues - which makes sense for a party that isn't likely to reach Parliament but has a chance of affecting a few policy issues.

I don't entirely endorse the policies with which they conclude - I would need to think a lot harder about the mechanics and feasibility of things like tax-free zones. But the general policy thrust of easing up on restrictions on redevelopment in Christchurch is a good one.

Here's the resulting video.

Policy change? Youth minimum wage edition

National has, much to my surprise, promised some policy changes around the youth minimum wage. I'm not optimistic that the changes will have substantial employment effects, but they could lead to changes that would. Let's parse things quickly as I have grading to finish.

First, let's recall my prior work, consisting of simple difference-in-difference forecasting models, showing that youth unemployment rates were about eight percentage points higher than expected subsequent to Labour's abolition of the differential lower youth minimum wage.

The Department of Labour commissioned Hyslop and Stillman to look at the changes in the youth minimum wage. They found big decreases in the number of youths in employment, but this was largely offset by increases in the number of youths in education, at least some of whom, by reports from school principals on Radio New Zealand, would really have been better off had they been able to leave school and enter employment.

Hyslop and Stillman also found that very few employers took up the New Entrants' Wage policy that would allow them to hire youths on a lower wage for the first few months of their employment; employers viewed it as not being worth the hassle.

Under Labour's policy, 16 and 17 year olds could be paid 80% of the adult minimum wage for their first three months or first 200 hours of employment (as well as workers aged 16 and up engaged in 60 credits per year of industry training). And few employers bothered with the paperwork hassles. Here's Hyslop and Stillman:

Although not definitive, we believe these patterns suggest the new entrants wage was largely non-binding after 2008. In addition, we suspect that, in practice, there may be significant issues associated with the information employers require on young workers employment experience and wage equity across their workers that inhibit employers using the new entrants rate. Below, we also show that, after 2008, the adult minimum wage appears to have a substantial binding effect on the wage distribution of 16-17 year-old workers. For these reasons, in our subsequent analysis we will assume that the adult minimum wage is the relevant minimum wage for all 16-17 year-olds after 2008. 

Ok. So the prior New Entrant wage was effectively useless in getting kids started in employment.

So what has National promised to do? Expand eligibility for the New Entrant's wage (now called the "Starting-Out Wage").

The starting-out wage will be set at 80 per cent of the adult minimum wage and three groups of people will be eligible:

• 16- and 17-year-olds in their first six months of work with a new employer.
• 18- and 19-year-olds entering the workforce after more than six months on a designated benefit.
• 16- to 19-year-old workers training in a recognised industry course involving at least 40 credits a year.

What's the sum total of the changes then?

• 16 and 17 year olds get an additional three months' eligibility for the training wage. Maybe this is enough to make employers deem the transactions costs worthwhile, maybe not;
• 18 & 19 year olds have access to the starting out wage - this is new;
• Youths in training only have to be doing 40 instead of 60 credits per year.

In short, there's not much there there. Or at least not much that could be expected to yield any substantial employment effects. [Update: it looks like the paperwork for employers wishing to use the new entrants' wage is simpler, which could start yielding some results.]

Even a complete reinstatement of the former youth minimum wage would only have had slow effects on youth unemployment rates. The best we can hope for on this one is that it opens the door to more substantial changes later on.

Google requests

Bruce Schneier points to some Google data on government demands for information.

One measure of a government's invasiveness could be the number of times it prods Google to take down content or provide information on users.

In no quarter in the released data did the New Zealand government request any information about users. Or at least that's what I gather from the ghosted tab in each quarter. In no quarter were there more than 10 requests for content take-down.

Another measure of reasonableness might be the number of such requests that Google bats back. In the second half of 2009, Google complied with 0% of <10 requests from NZ; I don't know whether any requests were received that period. Google complied with 83% of <10 requests in the first half of 2010, which likely means NZ made one unreasonable request. 100% of <10 requests were complied with in second half 2010, and 60% of <10 were complied with in first half 2011, which I reckon to be 2 requests (otherwise you don't get a round percentage).

I am far far less worried about Google than I am about governments' ability to force the delivery of user data. Google I trust - they just want to help people sell stuff to me. The better the ads I see, the more likely the ads are to actually be useful to me. No harm. But governments are aren't as trustworthy. And so it pleases me that my government seems to have made no requests for user data and makes relatively few unreasonable take-down requests, though I suppose that might change with our being beaten into compliance with American copyright demands.

Australia, 10 times our size, had 361 user data requests in first half 2011; Google complied with 73% of requests.

The United States had 5950 user data requests on 11,057 accounts in the first half of 2011. Here's one such request that Google declined: the American government wished Google expunge a video allegedly demonstrating American police brutality. More reason to trust Google more than your government.

PBRF rorts

Martin Lally of the University of Victoria at Wellington forwards the following email, which I have published here with his permission. I do not know anything about the claims there made, but they are consistent with rumours that floated around concerning the prior PBRF round and ... shenanigans around contracting allowing some universities to count people overseas towards their portfolio.

Dear colleagues  

I am sending this email in the interests of correcting some rumours that I have heard.   Over the past several weeks, I have heard claims from a number of senior staff in the University to the effect that Victoria University management have varied or sought to vary the employment contracts of a number of staff who are not active researchers, so as to ensure their temporary absence from the University at the June 2012 PBRF census date and thereby to improve the University’s PBRF result.  If true, such actions would clearly violate the spirit of the PBRF process and the Tertiary Education Commission requires universities to observe both the letter and the spirit of the process.  In short, any such actions would constitute accounting fraud.  

My first reaction to these (second-hand) claims was scepticism.  However, upon speaking to some people who had direct knowledge of some of these events, I was left satisfied well beyond a reasonable doubt that some such events had occurred.  Accordingly I conveyed my concerns to both the Tertiary Education Commission and the University Council.  As a result, the Chancellor has appointed a QC to investigate the allegations and provide a report to him; naturally I hope to see a copy of the report in due course.  I have been interviewed by the QC and have provided him with an overview of the information in my possession, but in such a way as to protect the confidentiality of my sources.  

Martin

I hope that the QC finds everything at Vic is fine, and that similar diligence is pursued at other universities. Some places would use a QC to find ways of rorting the system; it's a credit to Vic [and, in particular, those on Vic's Council that worked toward this outcome] that they're ensuring that individual units' incentives to rort the system do not work to denigrate the institution's overall reputation.

Planning for gypsys

Mark Pennington over at Pileus analyzes the expulsion of the Roma Irish Travellers [who I had mistakenly thought had had a link long back with the Roma] from an illegal camp site at Dale Farm in Essex. Honestly, I'd not paid much attention and had just figured that they were camped out on public land or on somebody else's property. But that was wrong. Here's Mark:

There is no doubt in my mind that the decision to evict the Gypsies from the site was the correct one under the terms of British law and land use planning law in particular. There is, however, equally no doubt in my mind that UK law in this regard is oppressive and provides a prime illustration of what happens when private property rights are over-ridden in the name of third party ‘community interests’.

As I understand it, the Dale Farm residents bought the property from whence they were evicted, but they acted illegally in erecting a campsite which had not been granted planning permission. As noted in previous posts on this site development rights in the UK are nationalised – if you own a piece of land you have no right to develop it as such – merely a right to request permission to do so from a local government planning authority which purports to represent ‘the community’. As a consequence, all land use decisions are fundamentally politicised and this typically results in the triumph of local ‘nimbyism’.

The Dale farm residents and other gypsies are unfortunate victims of this nimbyism. Though they were wrong to break the law in erecting an illegal site, the reason that they did so was that it is so difficult for them to legitimately build sites anywhere in the country – even on land that they themselves own. Whenever they apply for permission this is typically refused owing to the hordes of local nimby’s pressuring the local authorities and indeed the national government to keep out what are seen as ‘undesirable residents’.

Mark notes the irony of that those protesting the eviction also favour the democratization of all property use, ensuring the politicization of all land use decisions and the repression of folks who scare the median local voter. As Jennifer Roback points out* racism is cheaper at the ballot box than in the market.

* I love this article, which anticipates some of the arguments that came in the Brennan and Lomasky work on expressive voting and in Caplan's Rational Irrationality model.

Rugby elections

All the chatter about whether the All Blacks' Rugby World Cup victory had any effect on the upcoming election baffles me.

I'm told that it was a very close game and that New Zealand beat France by a single point despite being such heavy favourites going in that one Irish bookmaker paid out assuming no chance of a French victory. So the closeness of the game then should have been a surprise, right?

If a rugby loss would have substantially affected election outcomes, then we should have seen all kinds of action on PM.National and PM.Labour the night of the game. Instead, here's trading:

There was absolutely no trading during the world cup, nor was there much immediately after the result.

Seamus tells me that despite the All Blacks being ahead for the first part of the game, France got within a point around the 48 minute mark. And for a period near the end, Seamus put better than even odds on France winning. If a French victory would have substantially affected National's re-election chances, there would have been substantial trading when France got within a point, then again when victory was assured.

Why bother with all the armchair election speculation if we have market traders telling us that it really didn't matter? I can't see anything distinguishable from noise on the vote share market either.

Rules that create the wrong incentives

The semi-final match in the World Cup brought up an interesting anomaly in the rules of rugby. I don’t mean the abomination that was the red card. (Clarification, as far as I could see Rolland made the correct decision in sending Warburton off under the rules he is required to follow: It is the rules themselves that I believe are an abomination—I stick by my rant from last year on this.)

The interesting anomaly was the way that it could have been to Wales advantage to have had a prop injured off the field, so much so that the Welsh coach, Warren Gatland, admitted after the game that he had considering having a prop fake an injury. The basis for this is as follows. In a policy introduced a few years ago to deal with a spate of extremely serious scrum injuries, particularly in games played at lower levels, the IRB introduced a rule that both teams must have a full complement of two specialist props and a specialist hooker in order to have a contested scrum. Teams go into matches with one reserve prop and one reserve hooker. Accordingly, if two props or two hookers get injured out of the game in the course of a match, the game has to resort to “golden oldies” scrums in which neither team is allowed to push. This is a very good for a team that is being pushed back in scrums.

Now if faking were simply a black-and-white matter, one might just rely on teams having a sense of good sportsmanship and aversion to scandal (but see “bloodgate”), but injuries exist along a continuum and it is a judgement call as to whether an injury is serious enough to require coming off the field. The current rules allowing substitutions for any reason, not just because of injury were introduced after the South African coach admitted faking injuries simply to get fresh legs on the field.

So my suggestion is to similarly change the rules to eliminate any advantage to arise from having a front-row player injured: Allow any team to request non-contested scrums at any point in a game, either because they have run out of specialist front-row players, or simply because they are being too heavily beaten by the superior scrummaging of the opposition. Then, to reinstate the advantage that the team with the dominant scrum would have, allow the team that had not requested non-contested scrums to place one fewer players in the scrum. Currently the rules require teams to place at least seven players in the scrum, so I am proposing either increasing this to eight for the team requesting non-contested scrums, or reducing it to six for the other team.

RWC Economics

I've been more than a bit sceptical about the benefit numbers postulated for the Rugby World Cup. But Sam Richardson has been watching things more closely than I've been. And, he's now blogging! He writes:

If the best case scenario eventuates, and the event costs the taxpayer $26m (that is, 2/3 of $39m), then to be economically justified, we should see additional economic benefits of at least $26m. Of course, as has been reported, the costs of the tournament to local, regional and central government are quite a bit larger than $$39m. Thus we should expect to see substantial benefits to make the tournament worthwhile. Will we? Time (and research) will tell.

I'll look forward to seeing Sam's updates. You don't necessarily need measurable economic benefits of $26m to make the spending worthwhile - if the joy experienced by hosting the event were sufficiently large, it could be justified as consumption expenditure. But we'd also want to tally the economic losses suffered by sectors that saw a drop in custom custom as people were scared off by rugby traffic. And we'd also want to be careful to compare the feel-good benefits of the RWC with the benefits we could have achieved through other spending, and to put some weight on the losses experienced not only by the sports atheists like me but also by those who like rugby but don't like the congestion, parades, and diversion of public amenities. Sam looks to the increase in spending with the tournament:

The net change in spending is where we see changes in things like the tax take (GST, etc), which are listed in the expected benefits from the tournament. Gross figures are all well and good, but they are very difficult to substantiate or refute. Literature on previous mega events pretty much says the same thing - that the realised economic impacts are highly likely to be significantly less than initial projections.

Further, if rugby tourists consume amenities costly at the margin or otherwise rivalrous, then GST revenues too are an overestimate of benefits.

A mild superpower

Matt Nolan's convincing demonstration of the superiority of economists over Jedi reminded me of Scott Adams's useful description of economics:

When you have a working knowledge of economics, it’s like having a mild super power. For example, I use my knowledge of economics to avoid speeding tickets. I assume the local law enforcement agencies have limited funding and can’t be everywhere at the same time. That tells me, fairly reliably, when I can speed without detection and when I can’t.

I think his analysis there misses the important technological innovation that comes with speed cameras: the road to the airport is exactly where I'd put speed cameras rather than actual police: they extract revenues from folks who are scared of missing their flights but without generating the kind of political backlash that might come from making too many people miss their flights. I hope Scott Adams has a decent radar detector and a speed camera overlay on his GPS.

It's often safe to speed, and failing to speed can also get you pulled over.

Back to Scott Adams:

My reason for majoring in economics in college was to understand how the world works, so I would be more equipped to navigate in it. I think it was a good choice. Has your college major given you any mild super powers?

This ought to be front and centre on our Economics Department enrolment handbook. Take economics, get a mild superpower. Dilbert says so, so it must be true (Jedi mind trick hand wave...).

It's sciency!

Start by constructing good and bad explanations for psychological phenomena, with the latter just being circular restatements of the phenomenon. See how well a control test pool can distinguish good from bad explanations. Add irrelevant neuroscience jargon to both explanations without altering the form of either explanation. Surprise! Adding the sciency flavour makes it harder to distinguish good from bad explanations.

Our most important finding concerns the effect that explanatorily irrelevant neuroscience information has on subject’s judgments of the explanations. For novices and students, the addition of such neuroscience information encouraged them to judge the explanations more favorably, particularly the bad explanations. That is, extraneous neuroscience information makes explanations look more satisfying than they actually are, or at least more satisfying than they otherwise would be judged to be. The students in the cognitive neuroscience class showed no benefit of training, demonstrating that only a semester’s worth of instruction is not enough to dispel the effect of neuroscience information on judgments of explanations. Many people thus systematically misunderstand the role that neuroscience should and should not play in psychological explanations, revealing that logically irrelevant neuroscience information can be seductive—it can have much more of an impact on participants’ judgments than it ought to.
...
Regardless of the breadth of our effect or the mechanism by which it occurs, the mere fact that irrelevant information can interfere with people’s judgments of explanations has implications for how neuroscience information in particular, and scientific information in general, is viewed and used outside of the laboratory. Neuroscience research has the potential to change our views of personal responsibility, legal regulation, education, and even the nature of the self (Farah, 2005; Bloom, 2004b). To take a recent example, some legal scholars have suggested that neuroimaging technology could be used in jury selection, to ensure that jurors are free of bias, or in questioning suspects, to ensure that they are not lying (Rosen, 2007). Given the results reported here, such evidence presented in a courtroom, a classroom, or a political debate, regardless of the scientific status or relevance of this evidence, could strongly sway opinion, beyond what the evidence can support (see Feigenson, 2006). We have shown that people seem all too ready to accept explanations that allude to neuroscience, even if they are not accurate reflections of the scientific data, and even if they would otherwise be seen as far less satisfying. Because it is unlikely that the popularity of neuroscience findings in the public sphere will wane any time soon, we see in the current results more reasons for caution when applying neuroscientific findings to social issues. Even if expert practitioners can easily distinguish good neuroscience explanations from bad, they must not assume that those outside the discipline will be as discriminating.

There's a reason that folks try to make their prescriptions look more sciency.

Sentencing floors

Dan Gardner is right that mandatory minimum sentencing often yields perverse outcomes.

Now look at that first mandatory minimum sentence again: It means that anyone who grows six marijuana plants with the intention of sharing even a single joint with a friend will be guilty of an offence punishable with a mandatory minimum sentence of six months in jail.

And remember the phrase "real property that belongs to a third party"? That's what a rented apartment is. Imagine a university student living in a rented apartment with her boyfriend, suggests University of Toronto criminologist Tony Doob. She grows a single marijuana plant. She rolls a joint for her and her boyfriend. And just like that she's a "trafficker" subject to a mandatory minimum sentence of nine months in jail.

Are these outcomes simple, clear, and predictable? Hardly. They're shocking as hell. But mandatory minimums have a nasty tendency to do that.

He argues mandatory minimum sentencing has no deterrent effect. I'm not familiar with that literature, but mandatory minimums in the form of three-strikes legislation have substantial deterrence effects. They just may not be worth the candle.

Gardner nails one other point though:

But mandatory minimums don't actually do away with discretion.

They merely transfer it from judges, by restricting their ability to choose the sentence, to prosecutors, who choose the charge. The system is still ambiguous, uncertain, and unpredictable. It's just ambiguous, uncertain, and unpredictable in a different way.

Discretion lets prosecutors extract plea bargains to lesser charges from risk-averse defendants facing ridiculous minimum sentencing if convicted.

Deterrence or encouragement

One reason it's tough to identify deterrence effects of the death penalty: the long and variable lags between sentence and execution can be under conditions more pleasant than those in the general prison population.

AS AN ORANGE COUNTY jury debated in 2009 whether the white supremacist Billy Joe Johnson should live or die for murdering a fellow gang member, he asked to be sent to death row. Not because he felt any sudden remorse for the five people he’d killed over the years—“I commit crimes when people piss me off,” he once explained, matter-of-factly—but because Johnson believed he’d have better living conditions, including liberal phone privileges, a bigger cell, and daily human interaction, at San Quentin’s death row than he would at Pelican Bay, one of the state’s toughest maximum-security prisons, where he was serving a 46-year-to-life sentence, primarily in solitary confinement.

He also knew that the odds were good that he might never be executed. Bogged down by constitutional challenges and appeals, California’s system takes an average of 20 years to move a prisoner from conviction to execution.

Experts on both sides of the death-penalty debate have long agreed that California’s system is the nation’s costliest and least efficient. This June, a landmark report by Paula M. Mitchell, a professor at Loyola Law School, and Arthur L. Alarcón, a senior judge on the Ninth Circuit Court of Appeals, unearthed new data that reveal just how bad the system is.

Their report showed that since the current death-penalty statute was enacted in 1978, taxpayers have spent more than $4 billion on only 13 executions, or roughly $308 million per execution. As of 2009, prosecuting death-penalty cases cost upwards of $184 million more each year than life-without-parole cases. Housing, health care, and legal representation for California’s current death-row population of 714—the largest in the country—account for $144 million in annual extra costs. If juries continue to send an average of 20 convicts to San Quentin’s death row each year, and executions continue at the present rate, by 2030 the ranks of the condemned will have swelled to more than 1,000, and California’s taxpayers will have spent $9 billion to execute a total of 23 inmates.

I'd want to see that as a per-case excess cost rather than as an aggregate. But it's hard to see how the system makes sense.

Bootleggers and Baptists - alcohol regulations

In America, liquor licencing regulations generally serve to protect incumbent liquor stores against competition while being supported by anti-alcohol community activists that give the veneer of public interest. Here's Minneapolis:

The Star Tribune has (finally) caught on to the curious story of Dan Kerkinni, whose attempts to open a craft beer-oriented liquor store in Uptown has highlighted the complex and restrictive regulatory regime controlling liquor stores in Minneapolis. As you likely know by now, Kerkinni was first Bock-blocked by the City Council, with Council Member Meg Tuthill pushing through new distancing requirements to prevent Kerkinni’s store from opening at 26th & Hennepin. His second attempt to open the store, in a small retail space a block south at 27th & Hennepin, looks doomed to fail, as the young entrepreneur (and his brother Pierre) have been outmaneuvered by Kowalski’s Market, which has received land use approvals for a wine shop addition at their 24th & Hennepin grocery store.

Meanwhile, in New Zealand, small wineries are petitioning the government that duty-manager requirements to be imposed on cellar-door operations under the proposed revision to alcohol legislation will force their closure.

But at least the Select Committee report back on the bill recommended knocking out some other bits of silliness.

We recommend inserting new clause 100(2) in order to carry over a provision from the Sale of Liquor Act which prohibits the licensing decision - maker from considering the potential effect of a licence on the business of another licence holder. We do not believe that businesses should be able to use the licensing process to block potential competitors.

I'll expect that the amenity provisions in licencing would still have the effect of allowing competitors to encourage the lodging of objection to new licensees, but it's nice that they're at least worrying about the problem.

RBNZ on seismic risk

Here's RBNZ Governor Alan Bollard on the Reserve Bank's activity during the Canterbury earthquake:

One of our most pressing concerns immediately following the earthquakes was the maintenance of payments systems. In the aftermath of events such as natural disasters, there is strong demand for food, water, petrol and other necessities. And with damage to power and telecommunications systems, access to cash is a key concern. Only two hours after the  February earthquake the Reserve Bank started receiving orders from banks for more cash for delivery to Christchurch. Ensuring cash was available required us to work closely with banks and Cash in Transit companies to meet the spike in demand. This task was complicated by damage to roads that meant travel, where possible in Christchurch, was taking about three times as long as normal.

The public also needed information about where cash was available. To ensure this, Bank staff used Google maps to provide a live feed of operational and accessible ATMs. Overall about $150 million of extra cash was sent to Christchurch in the week of the earthquake, representing about $350 per resident.  There was a big drop in electronic payments and increased demand for cash, initially in the form of $20 and $50 notes through the surviving ATM machines. We learned a lot about ATM configuration to ensure operability, and the internet was very useful to provide up to date information on ATM availability.

I saw a lot of non-functioning bank machines, but I didn't see any not working in places where the power was on and the phones were working. After the February quake, there wasn't really anything on my side of town on which money could be spent. But the precautionary motive for cash balance holding certainly has affected how much I keep on hand.

Bollard goes on to talk about balancing medium-term inflation risks coming from eventual Canterbury reconstruction against short term declines in economic activity. The costs in Wellington of a similar event would be far worse: more roading chokepoints through hills, dependence on the Cook Strait Cable, and an airport built on land that didn't exist prior to an earlier earthquake.

RBNZ is ready in case Wellington goes down:

But even though our building could be standing after an earthquake, there is a risk that damage to surrounding buildings could make the Wellington office  inaccessible. To ensure that the Bank's core functions can be maintained in such circumstances, an Auckland office has been set up that houses a dozen staff on a day-to-day basis. These staff are engaged in a number of business critical roles (including foreign reserves management, domestic liquidity, and payments and settlement systems) to ensure the economy of New Zealand would continue to function with some stability in the event of a major disaster. Furthermore,  provisions in the Reserve Bank Act provide for the delegation of key aspects of the Governor's role to the Auckland Office Manager, with appropriate safeguards.

They warn against over-reaction: guarding against downside risk imposes cost in states of the world where the risk doesn't obtain, and it's possible to overinsure against earthquake risk with building regulation. But they also warn about our potential isolation in the case of a big hit to Wellington. It's because of this latter risk that I've worried about EQC's being heavily invested in domestic government securities. Hopefully any future rebuilding of the fund will have more diversified asset holdings.

There will have to be a serious rethinking of EQC's role once the current disaster has played out; it will be interesting to see what changes RBNZ and Treasury recommend. The interplay between EQC and private insurers have been a complete mess. Whatever losses might obtain due to agency problems in a world where EQC simply covered the first $100k of property damage as assessed by the private insurer are likely less than the costs that we're currently seeing due to coordination failures between insurers and EQC.

Earthquake Economists Wanted

CERA, the Canterbury Earthquake Recovery Agency, is looking for an economist.

The position of Economist is a senior level role that reports to the General Manager, and is required to contribute to the development and implementation of plans originating from the Recovery Strategy, including the overarching Economic Recovery plan.

The Economist is responsible for ensuring a strengthened economic focus across CERA, advising and influencing work programmes and outputs. Working closely with key stakeholders, a focus is to ensure the right conditions are in place to encourage and support economic recovery and growth.

Key deliverables will include developing priorities and programmes that partner with the economic efforts of private business, collaborating with central and local government to ensure the recovery is business friendly. The Economist is expected to inject commercial savvy and apply an economic lens to set priorities, develop high quality strategic level analysis, policy development, methodologies and frameworks. Essentially, this role will lead and oversee work based on identification of economic and financial impact of proposals, market drivers, opportunities and threats to progress.

We are seeking an Economist who is experienced at a senior level, well networked and highly credible across the economic sector. You will have a track record of success when developing economic advice, leading consultation, planning and management of projects with key interdependencies and trade-offs. This opportunity presents a unique opportunity to join a skilled and passionate team committed to making a real difference for all who live and work in greater Christchurch.

There are a half-dozen economists I can imagine doing this job well and rather more that I can imagine doing it badly. Let's hope they pick one of the good ones.

Here's the full position description for those interested in helping out.

The Marijuana Vote

The age breakdown in the latest US Gallup poll is the best argument for increasing youth voter turnout. Overall support for legalizing marijuana has just passed 50% in the US. But the age breakdown would likely have the median voter still in opposition.

Support for legalizing marijuana is directly and inversely proportional to age, ranging from 62% approval among those 18 to 29 down to 31% among those 65 and older. Liberals are twice as likely as conservatives to favor legalizing marijuana. And Democrats and independents are more likely to be in favor than are Republicans.

More men than women support legalizing the drug. Those in the West and Midwest are more likely to favor it than those in the South.

I wish there were current New Zealand polling data on this one.

Two upcoming engagements

Christchurch readers may be interested in marking their calendars for my upcoming plenary lecture as part of the University of Canterbury's Spring Lecture Series. The series, I'm told, is the replacement for the former "UC in the City" series which has had to be relocated to campus with changes in venue availability downtown.

The evening of 29 November I'll be presenting an accessible lecture on public choice's findings on voter knowledge and policy outcomes, noting some of my own work on voter knowledge in New Zealand and some of my work with Bryan Caplan, Ilya Somin, and Wayne Grove on voter ability correctly to attribute responsibility for political outcomes. I'll hope to see at least some of my loyal local readers there. The University's requiring an RSVP for this one; get in early to save yourself a place!

Wednesday (Canadian time) I'll be presenting via videoconference to Brewers Association of Canada on my work with Matt and Brad on inflated measures of alcohol's social costs. As the basic method for deriving these costs came from a meeting in Banff back in 1994, a chat with the Canadians seems due. Canada may have apologized sufficiently for Bryan Adams, but we have penance more to do.

Contractarian non-voting

Does agreeing to play the game make you complicit in the game's outcome?

I'd argued a contractarian case for conscientious non-voting.

I've a reasonable contractarian foundation. If I agree to a process, then I'm bound to accept the outcome of that process. And voting outside of a context where baseline rights are protected against majoritarianism means I give assent to the process that strips others of their rights, even if I voted against that outcome. It's not Sophie's choice, but it's not a good one.

I often hear arguments of the form "Well, if you don't vote, you can't complain." A contractarian of my stripe would reverse things: if you agreed to the rules of a poker game, you can't whine afterwards that you lost your shirt. If you don't like the game, you shouldn't play it at all: abstention is not unreasonable.

Eli Dourado tries to give me a way out. He agrees with conscientious non-voting, but thinks the contractarian turn unnecessary and, worse, wrong. Here's the first part of his argument, with which I agree entirely:

What Brennan misses (at least in the essay; I have not read the book) is that the cause of all these harms is not just that voters make bad choices. That is a narrow perspective. It is that so many domains are subject to collective choice in the first place. The correct response to the question, “Shall we pass a law that destroys the lives of people who use drugs, especially if they are black?” is not merely “No,” but “Take your democracy and shove it.” Merely responding “No” is collectively harmful, because it fails to challenge the implicit proposition that the domain is rightly subject to collective choice.

When you vote in an election on an issue (or for candidates who can decide an issue) that should not be subject to collective choice in the first place, your vote makes no instrumental difference. It is therefore costless not to participate. By the Clean Hands Principle, you should not vote in such an election.

The libertarian's vote does at least as much to legitimate democratic jurisdiction over personal private choice as it does to move the outcome of that choice. I went a bit farther than that, arguing that voting signifies assent; Eli disagrees:

Does my vote, my “getting my hands dirty,” constitute consent in contractarian terms?

I think it clearly does not. The simplest example is one in which dissenters misunderstand how improbable decisive voting is. Suppose that the question I cited earlier, “Shall we pass a law that destroys the lives of people who use drugs, especially if they are black?” is in fact at issue in an election. A minority of 30% oppose this measure, and half of these correctly believe drug use should not even be subject to collective choice. Nevertheless, the 15% of people who oppose collective choice for drug use incorrectly believe that there is a significant chance that their vote will be decisive. Since the vote is happening no matter what, they show up at the polls to try to avert disaster. Does their voting on the question on the basis of mistaken beliefs about their probability of success constitute consent? I believe it does not.

Another example is the case of the Hail Mary pass; it involves no mistaken beliefs. Suppose you arrive at home to discover that some gunmen have broken into your house and are about to execute your daughter. The gunmen offer you a proposition. They happen to have 100 dice with them; if you roll 100 1s, they will spare your daughter’s life. Now, you know very well that the odds of rolling 100 1s with 100 d6 is 1 in 6^100, a very large number, but you say a Hail Mary and roll them anyway. Are you therefore consenting to your daughter’s execution, or at least to the proposition that rolling dice is a legitimate way of deciding whether your daughter should be executed? Again, I think not.

Like most people, I believe that consent can be a source of obligation, including political obligation. But only real consent counts; if your disgust at political discourse and need for self-expression overcomes your desire to keep your Hands Clean, then yes, your hands are dirty, but no, you haven’t consented. Consent has to be intended. The fact that contractarianism in practice relies so heavily on unintended forms of (fake) consent means that we don’t really have to take it seriously as a source of political obligation.

I agree with Eli that the threshold for consent in contractarianism is pretty low. If we can imagine that individuals sufficiently insulated from their interests by the constitutional veil could have unanimously consented to a set of constitutional rules, then the constitutional move solves democracy's infinite regress problem. Everybody knows that that consent is fake, but it's a useful thought experiment. But if imaginary consent by hypothetical people behind the veil lends moral weight to a constitution,* how can the real voting act not convey some kind of consent?

I'll agree with Eli that nobody would take the Hail Mary example as constituting consent. It's a contract signed under duress. Neither the signer, nor anybody around, nor the gunmen (unless he's utterly insane) would view there as having been consent. The contract wouldn't stand up in court either. Nobody takes coerced consent as real. Even if we imagine a case where a crazed gunman forces somebody to sign a contract that he was already about to sign, we'd still require some second affirmation after the gunman had been locked away that the consent was real. It isn't just what's true in the signer's heart that matters, it's how the community of observers understands the act.

Imagine an alternative case where I undertake something that any reasonable person would understand as constituting consent, but that I hadn't consented in my heart. Then, my only out is if I can demonstrate that it was unreasonable to have expected that I understood the act as signifying consent. So when Firefly's Captain Mal unwittingly wed a local lass by participating in a local ceremony (hit the 2:50 mark), the consequence of which he did not understand, he was eventually able to extricate himself - partially because the local lass wasn't quite what she'd seemed either. But everyone around understood the act as constituting assent, even if he was unaware.

Turn things around a bit. If Mal knew that everybody understood his acceptance of Saffron's gifts as acceptance of marriage, and he still accepted the gifts, he would either be consenting to marriage or engaging in fraud in hopes of a fun wedding night to be followed by an "I didn't know!" annulment. But not having consented in the deepest cockles of your heart isn't a defence to breach of contract.

Alas, I didn't write philosophy as an undergraduate. I'm sure there's a philosophical literature on what's sufficient for consent, and it probably isn't "voluntarily doing something, knowing that most people take the act as constituting consent". But that's my working hackish definition.

In Eli's argument, the voting act can do harm "because it fails to challenge the implicit proposition that the domain is rightly subject to collective choice." If we're in the world in which a libertarian's voting can do harm on this kind of basis, we're also in the world in which people take voting as signifying some agreement with the implicit proposition; I'm not sure how this "failure to challenge" can do harm unless the act of voting goes a bit farther and gives at least some support to the collective choice mechanism. Would we see so much handwringing about the health of democracy when turnout rates dip if the voting act didn't provide at least some kind of support for the system?

Eli gives some nice cases in which someone may vote while not assenting to the domain of collective choice. But pointing out these kinds of cases isn't enough to show that voting doesn't normally demonstrate agreement; lying to the murderous horde at the door that's seeking somebody hiding in your basement doesn't make you a liar, but lying for fun when there's no great reason for doing it just might. Voting when you reject the system is a bit fraudulent, but sometimes there are worse harms to be avoided.

My confidence in the propositions here advanced is pretty weak - philosophy just isn't my absolute or comparative advantage. And note the caveat in my first post: the case here advanced only applies to the anarcho-curious (Dourado @Normative's nice term) and strong minarchists who view most actions of government as illegitimate. Brennan's case is far more general and applies to all would-be voters: if you vote, it is wrong to vote badly.

* Yes, the weight is weak because the assent is hypothetical. But it can rule out at least some potential constitutions - ones that leave an individual worse off than he would be in the state of nature.

Rena or arbitrage?

National's chances of winning the 2011 election peaked around 95% just prior to the Rena crash. Since then, they've dropped to 92%. Matthew Hooton's chalked some of this up to Rena. I wonder if that's it though.

For the last couple of weeks, CentreBet has had National at 1.15: a $1 bet on National paid out at $1.15, which is about $0.87 in iPredict terms. At the same time, National was trading around 95 cents. And I started arbitraging a bit - clearing some of my large long-National short-Labour position at iPredict and putting some big orders in the book to do more of the same while throwing a few hundred onto National at CentreBet. Apparently a few other folks started reckoning National a cheap deal at CentreBet: HomePaddock points to some big money hitting CentreBet on National: they note one $10k bet - far far more than I'd played.

So what's the price at CentreBet now? $1.09. Or, $0.917 in iPredict terms. What's the price at iPredict? $0.9264, but with only about $20 of action in the book between the current price and the CentreBet price. So it's barely worth making the arbitrage play given iPredict's transaction fee for price-takers.

Arbitrage between iPredict and CentreBet can easily account for the entire price drop in National at iPredict.

The price in the Vote Share market has dropped too, though, and this is one that can't be directly arbitraged. National's plummeted there from about 50% just prior to Rena to about 46% now; Labour's risen from 28 to 30; the Greens have risen from just under 10% to just over 11%. The other parties have been somewhat stable: ACT around 3.6%, NZ First around 4.5%, United Future on 1.9%, the Maori Party on 1.25%, and all other parties (includes Mana, Conservatives, and anything else) at 2.2%.

But I'm not entirely confident in the prices in the vote share market. A couple reasons why:

• The price on NZ First is really spikey: somebody keeps coming in and boosting the price up above 5%, but the price on a contract paying $1 if Winston Peters enters Parliament has been below 18% for weeks, barring a few oddball spikes. If NZ First's likelihood of crossing the 5% threshold were accurately reflected in price moves in the vote share market, then we'd see a lot more action around the 50% line in the Peters contract. But we haven't. Why? Presumably because the trader trying to inflate the price of the Peters contract can afford to sustain manipulation on a penny stock where folks taking the other side of the trade would have to lock up tons of liquidity for trivial gains for another month but can't do it where traders taking the other side can earn a reasonable return by smacking him back. Any arbitrage bot working to keep the sum of contract prices at the $1 mark will trade down the big contracts in response to goofing around on the penny stocks.
• If National really were likely to earn 46% of the vote and Labour plus Green were really at 41%, and ACT were only 58.5% likely to return to Parliament, and UF were only 79% likely to return to Parliament, I'm not sure that National would be trading up around 92 cents. But I'll need to update the spreadsheet I'd worked out for the 2008 election and have a play; a lot will depend on how much overhang is generated in the Maori seats this time 'round. Absent substantial overhang, wasted vote from the minors likely doesn't tip the balance between National and Labour/Green.

Coaching

Could a good surgeon use a coach? Dr. Atul Gawande thought he might. He'd reached a performance plateau and so went out looking for help from one of his former teachers, a retired surgeon. Result?

That one twenty-minute discussion gave me more to consider and work on than I’d had in the past five years. It had been strange and more than a little awkward having to explain to the surgical team why Osteen was spending the morning with us. “He’s here to coach me,” I’d said. Yet the stranger thing, it occurred to me, was that no senior colleague had come to observe me in the eight years since I’d established my surgical practice. Like most work, medical practice is largely unseen by anyone who might raise one’s sights. I’d had no outside ears and eyes. Osteen has continued to coach me in the months since that experiment. I take his observations, work on them for a few weeks, and then get together with him again. The mechanics of the interaction are still evolving. Surgical performance begins well before the operating room, with the choice made in the clinic of whether to operate in the first place. Osteen and I have spent time examining the way I plan before surgery. I’ve also begun taking time to do something I’d rarely done before—watch other colleagues operate in order to gather ideas about what I could do.

In a Hansonean turn, Gawande then considers why coaching isn't used more often:

Osteen watched, silent and blank-faced the entire time, taking notes. My cheeks burned; I was mortified. I wished I’d never asked him along. I tried to be rational about the situation—the patient did fine. But I had let Osteen see my judgment fail; I’d let him see that I may not be who I want to be.

This is why it will never be easy to submit to coaching, especially for those who are well along in their career. I’m ostensibly an expert. I’d finished long ago with the days of being tested and observed. I am supposed to be past needing such things. Why should I expose myself to scrutiny and fault-finding?

I have spoken to other surgeons about the idea. “Oh, I can think of a few people who could use some coaching” has been a common reaction. Not many say, “Man, could I use a coach!” Once, I wouldn’t have, either.
...
“Most surgery is done in your head,” Osteen [the coach] likes to say. Your performance is not determined by where you stand or where your elbow goes. It’s determined by where you decide to stand, where you decide to put your elbow. I knew that he could drive me to make smarter decisions, but that afternoon I recognized the price: exposure.

For society, too, there are uncomfortable difficulties: we may not be ready to accept—or pay for—a cadre of people who identify the flaws in the professionals upon whom we rely, and yet hold in confidence what they see. Coaching done well may be the most effective intervention designed for human performance. Yet the allegiance of coaches is to the people they work with; their success depends on it. And the existence of a coach requires an acknowledgment that even expert practitioners have significant room for improvement. Are we ready to confront this fact when we’re in their care?

“Who’s that?” a patient asked me as she awaited anesthesia and noticed Osteen standing off to the side of the operating room, notebook in hand.

I was flummoxed for a moment. He wasn’t a student or a visiting professor. Calling him “an observer” didn’t sound quite right, either.

“He’s a colleague,” I said. “I asked him along to observe and see if he saw things I could improve.”

The patient gave me a look that was somewhere between puzzlement and alarm.

“He’s like a coach,” I finally said.

She did not seem reassured.

Every now and again, universities think it would be a good idea to send all of their profs off to take coursework in teaching. A former classmate of mine had to complete such a degree when he took a job teaching economics at Monash University several years ago; Canterbury talks about similar requirements. I would be very surprised if there were any positive return on the time investment.

But few of us seek out colleagues for constructive criticism. Exposure's not comfortable. Perhaps universities keen on improving teaching quality would do better in identifying standout teachers to assist as coaches rather than mandating completion of tertiary teaching degrees.

HT: @Isegoria

Free funerals!

About the smallest compensation that we might consider giving organ donors is payment of funeral expenses. In New Zealand, it's still illegal - organs can't be given in exchange for financial consideration, although Dunedin's medical school is allowed to pay some parts of the funeral costs for someone whose body is donated to science: they cover embalming and cremation, but not the funeral service.

In Britain, the Nuffield Council on Bioethics now endorses payment of organ donors' funeral expenses. But even that, apparently, is fraught with ethical peril.

What we should be concerned about when it comes to incentives for organ donation is not the purity of donors' motives, but the way that payments could facilitate coercion or exploitation of those in poverty.

Organ donation should be a fully free choice for each of us, and never an economically necessary one.

For this reason, it is important that organ donation never becomes the only way to pay for one's funeral. The government currently provides funeral payments from the Social Fund to those in poverty. It must continue to do so as a safeguard against coercion and exploitation, if funeral expenses for donors are introduced.

Surely the disutility felt by families who find the option of a free funeral to be painful ought to be weighed against the considerable gains to a transplant recipient. And I'm glad that Nuffield comes to the right conclusion on this particular issue - that payment of funeral expenses is worth it. I just don't get how so much weight has come to be placed on the losses from very hypothetical coercion against the very very real gains to transplant recipients.

Angry words

Matt Nolan over at TVHE takes a swipe at the folks apparently scheduled to protest outside of RBNZ tomorrow.

I understand why people feel worn down, I understand the power and importance of non-violent protest, but I have to say something that will likely upset the protesters and many of my closest friends:

This protest and its message are wrong, and by doing it you both ignoring the real issues in the world and acting in a selfish way – and for that reason I think less of every single one of you.

That’s a pretty damned cutting statement – so let me discuss why I believe this.

Matt's right that RBNZ has made less a hash of things than the US Fed. Where I was worried about signs of impending inflation in early 2008, they rightly read the stats and saw hell about be unleashed.

People in the US are protesting because there seems to be no rhyme or reason to this change – furthermore, unemployment has been at 10% for a very long time, and all hope appears to be gone.  The fact that so much “corporate welfare” exists in the US is also very upsetting – as it should be.

But in NZ we haven’t had any of this – in fact incomes have risen sharply across the board, unemployment is still below the levels it was a decade ago (and employment rates are much higher), and we don’t have ridiculous corporate welfare policies.  We have great institutions – including the Reserve Bank – which have helped to ease the pain from the drastic global events on New Zealand.

… and yet the protesters are standing outside the very places that HELPED New Zealand during the crisis.  I’m not sure if this is because they don’t understand what is going on, or because they just think it’s a great way to get attention – but it is an extremely poor idea to protest there.

If you want to “show solidarity with the US”, do it at the US embassy – not in front of the very places that have helped all New Zealander’s out during a time of global crisis.

I'll quibble, but only ever so slightly. The RBNZ and Treasury were forced into a deposit guarantee scheme that provided one-way bets for folks investing in dodgy finance companies. For that I'd put more blame on Cullen and Key than on either RBNZ or Treasury. If you're going to be mad at one of the bureaus about it, Treasury might might be the better target. But both did the best they could in rather a bit of a mad rush.

It's right to be angry that South Canterbury Finance's losses were socialised. But I suspect that the Wellington protesters would not have supported that SCF investors take the haircut themselves; I'd also expect the protesters wouldn't particularly want AMI's customers/owners to take the insurance haircut after the Christchurch earthquake.

I'll entirely endorse Matt's conclusion:

There is another underlying issue that exists here, one that is very important to me.

There is all this talk about “inequality” and “helping the poor” … and yet none of these people want to help the poor or reduce inequality – they just want to take from the extremely rich and give to the very rich, which happen to be themselves.

The real inequality is not within nations, it’s between nations (a good example of how to view this was given by Nigel Pinkerton a couple of weeks back) – the calls by people in the US to introduce protectionism against China, the complaints in NZ that foreigners are “taking our jobs”, are further signals of the DISGUSTING self-interest that exists in these views.

These people aren’t interested in the poor, they are interested in themselves – either that or they haven’t thought about the issue, which is pretty slack when you are going to go out and protest about it.

If we want to help the real poor we need to open borders, and make a concerted effort to help increase capital and opportunities in foreign countries – rather than just focusing on ourselves.

When I here people complain that they are the “99%” do they realise that only the top 1% of people in India have a living standard greater than the bottom decile of people in the US?  Do they even care about the sheer number of people born without any opportunity to live the sort of privileged life we get.

Seriously, when I hear the complaints from these people, this is what I hear in my head:

“We want cheaper coffees and iPhones for ourselves, and people with lots of money should buy them for us”

But we can’t do anything about overseas, we can do things at home!

What a bleeding load of crap this reasoning is.  If the majority of the country put pressure on politicians to open borders and send tax money overseas of course they would – it would get them frikken elected.

In reality there is a reason people need to identify themselves as part of the “99%” … its because these protests are about them getting things for themselves – not about doing what is right.

And for this reason I find the protests insulting, pure and simple.

Americans are dead right to be very very angry about Wall Street crony capitalism that gives one-way bets to investment bankers in the name of preventing systemic risk. Two years ago, it was high time that a few banks go bankrupt, the depositors get paid out, and the bondholders get burned. Now, it's past due. It's obscene that Slovak taxpayers be asked to provide a bailout that covers rich German bondholders of Greek banks. We've fortunately not seen a lot of that kind of nonsense in New Zealand. We just don't have the same cause for protest.

But protests aren't really about policy anyway.

Mutant smoking statistics [updated]

TVNZ reports:

Australia's Cancer Council said the Senate should end the political delays and get on with passing the legislation, with authorities estimating smoking now kills 15,000 Australians each year and costs the health system $32 billion.

Oh please. What's the source on the $32 billion? Almost certainly Collins & Lapsley, who found that the total costs of smoking in Australia were $32 billion. How much of that $32 billion was health? $318.4 million. Is that much much less than the aggregate tobacco excise tax take? Certainly. I'm just going to copy Collins & Lapsley's tables here.

Here we have tangible costs divvied up by category (intangible costs of premature death and the like make up the bulk of the purported costs of tobacco and aren't in this table). Note that we've disputed the alcohol figures rather strongly. But what do we see? By C&L's figures, tobacco costs the Australian health system $318.4 million. That's somewhat less than the figure claimed by the Australian Cancer Council, assuming that they're quoted correctly [Update: see below]. Two orders of magnitude less. The costs to the health system are ONE PERCENT of the costs cited by TVNZ.

As for overall costs to the country, here's Collins and Lapsley again:

So tobacco leaves the Australian federal government up $2.7 billion and state governments up $833 million.

But the Australian Cancer Council gets to build support for beating on tobacco by helping to make folks think that smoking costs the health system $32 billion, again assuming that they've been correctly cited or that I've not missed their post clarifying that they'd been mis-cited. [Update: see below.]

And, this isn't the first time that the total C&L tobacco cost figure has been cited as a cost to the health care system; here's Chris Snowdon fisking a May story from The Age.

I wish TVNZ would check its sources from time to time. But, they've provided my nomination for Stat of the Week.

Update: Paul Grogan of the Australian Cancer Council emails noting that they're not the source of the $32b figure: "I am not aware of any Cancer Council Australia document that claims tobacco costs $32b in annual healthcare costs." Excellent news. The TVNZ / Reuters story linked then either is misleading or misquotes and ought to be updated. I trust that the Cancer Council will soon be issuing notice to Reuters that the annual health care costs of smoking are one percent of the figure Reuters quoted. They might also note the billions in tobacco excise tax revenues that swamp any fiscal cost smokers impose on the health care system.

Nautical disaster

Homepaddock has the latest updates on the Rena, along with a not unreasonable explanation from Jackie Blue on the appropriateness of the government's response. I'd like to hear an engineer's view on whether the oil could have been extracted more expeditiously. But the explanation on the lack of booms seems plausible - when weather makes the water choppy, they're useless. They also were reckoned one of the least useful cleanup methods in the BP Gulf mess.

More important is that policy ensures that the clean-up costs fall on the right parties. Maritime New Zealand's Oil Response document (HT: Anon) says clean-up costs fall on the spiller:

Wherever possible the full, reasonable cost of any spill response and clean-up operation will be sought from the spiller.  All efforts will be made at both the regional and national levels to ensure that costs are recovered.  The Maritime Transport Act provides the statutory mechanisms for all reasonable response costs to be recovered from spillers by the regional councils or Maritime New Zealand.

...

For non-tanker vessels greater than 400GRT, New Zealand law requires evidence of insurance sufficient to meet owners' potential liability for pollution damage and response costs.   

The Rena weighed in at only 300 tonnes, so wouldn't have had to have carried as much insurance.  [The Rena met the 400GRT standard, see Duncan's comment below.] Reports vary on how much coverage she did have: the prior link says $14 million, but this one says up to a billion for clean-up. If the latter one's true, the clean-up ought to be covered quite nicely.

It's been a bit surprising that Key didn't jump out in front on this one as Parker did during the Christchurch earthquake. A few early beach speeches on how he was going to make sure those responsible for the mess would be liable for any clean-up could have diffused some of the stick he's taken. But he's perhaps gun-shy after overpromising on Pike River. iPredict still says National will win (93% chance of a National PM) but with a reduced vote share (47.5%). Meanwhile, the Greens are up to 11% of the popular vote.

And in case Stephen Franks is reading, the title's there not because I think Rena a disaster in absolute terms, which it isn't, but rather because it's a disaster for our chances of having reasonable oil exploration where both the upside and downside risks are borne by the drillers. If the public perception of this one is socialized losses, it's harder to make the case that oil drilling would be different. But most importantly, it's a great excuse to put up one of my favourite Tragically Hip songs. Will the Hip ever tour New Zealand? We live in hope.

Rights versus Trade-offs: RWC edition.

In the past I have given a talk on to non-economists in the health field on health economics, in which I would start by outlining differences in the way health economists and other health professionals frame issues. One of the main differences in mindset, I claim, is that economists’ focus on allocating scarce resources between competing uses tends to have us pitch policy issues in terms of trade-offs at the margin rather than fundamental rights. So rather than a “right to basic health care”, we would think in terms of health care having a very high value that might have to be traded off against other valuable uses of the same resources. The bottom line is that, if you allocate resources to achieve some absolute right, the envelope theorem suggests that, almost certainly, the marginal unit allocated to that objective could have been better spent elsewhere.
So I am conflicted in thinking about the response of the International Rugby Board to complaints about unfair scheduling of games during the current world cup.

To recap, the 20 teams in the competition were divided into four pools of five teams, with each pool playing a round robin competition to find out which two teams from the pool would proceed to the knockout rounds. The round-robin took place over a period encompassing four weekends (Friday to Sunday), so that it was possible for a team to play one game each weekend, with 6-8 days between each game. Because there were an odd number of teams in each pool, however, there would be one team from each pool not playing in any given weekend, meaning that some games had to be scheduled mid-week, with teams getting only 3-4 days to recover between consecutive games.

The problem then is that maximising television revenue requires that the teams from the major rugby playing nations have their games scheduled for the weekend, leaving the mid-week games for the so-called minnows. This had the unfortunate consequence that the higher ranked teams had an easier schedule than the minnows, giving the latter almost no chance of achieving an upset appearance in the knockout phase.

The IRB defended this by pointing out how they use the revenue from the World Cup to invest in the smaller nations.

So what should I think about this. My gut instinct is that there is no point in having a tournament if the conditions are not to be the same for all teams, or at least if there are differences they should be applied blindly, not based on who the teams are. But my “trade-offs not absolute rights” economist mantra suggests that I should be asking if the benefit of greater revenue exceeds the cost of unfair scheduling. Am I being inconsistent? Probably I am, but I still think the scheduling stank. If that makes me guilty of using moral heuristics rather than thinking carefully about trade-offs, so be it.

Drinking culture [updated]

Some sense from Kate Fox at the BBC:

The problem is that we Brits believe that alcohol has magical powers - that it causes us to shed our inhibitions and become aggressive, promiscuous, disorderly and even violent.
But we are wrong.

In high doses, alcohol impairs our reaction times, muscle control, co-ordination, short-term memory, perceptual field, cognitive abilities and ability to speak clearly. But it does not cause us selectively to break specific social rules. It does not cause us to say, "Oi, what you lookin' at?" and start punching each other. Nor does it cause us to say, "Hey babe, fancy a shag?" and start groping each other.

The effects of alcohol on behaviour are determined by cultural rules and norms, not by the chemical actions of ethanol.

There is enormous cross-cultural variation in the way people behave when they drink alcohol.

...the variation is clearly related to different cultural beliefs about alcohol, different expectations about the effects of alcohol, and different social rules about drunken comportment.

This basic fact has been proved time and again, not just in qualitative cross-cultural research, but also in carefully controlled scientific experiments - double-blind, placebos and all. To put it very simply, the experiments show that when people think they are drinking alcohol, they behave according to their cultural beliefs about the behavioural effects of alcohol.

...I would like to see a complete change of focus, with all alcohol-education and awareness campaigns designed specifically to challenge these beliefs - to get across the message that a) alcohol does not cause disinhibition (aggressive, sexual or otherwise) and that b) even when you are drunk, you are in control of and have total responsibility for your actions and behaviour.

Alcohol education will have achieved its ultimate goal not when young people in this country are afraid of alcohol and avoid it because it is toxic and dangerous, but when they are frankly just a little bit bored by it, when they don't need to be told not to binge-drink vodka shots, any more than they now need to be told not to swig down 15 double espressos in quick succession.

I'm surprised that the Beeb allowed talk about personal responsibility!

Read the whole thing...

HT: Anon.

Update: Harford notes the author has worked for the alcohol industry. Watch for one-sided scepticism, but it's also worth following up on the experiments noted. I'll see whether I can track down the cites.

Life imitates Art - Strange Brew edition

The Canadians (and Canuckophiles) among you will recall that Bob & Doug MacKenzie were shamed into giving a 10 year old kid a refund for his ticket to Mutants of 2051 A.D. - the film within the film that didn't live up to audience expectations.

Well, if you can't shame a refund out of a film-maker, maybe you can sue. Here's Mike Masnick:

Sure, we've all noted that various movie trailers may not be representative of the movie, but is that an illegal bait-and-switch? Sarah Deming apparently believes so, and somehow found a lawyer willing to sue over this awful deception (thanks to Will for sending this in). Her specific complaint? She expected the recently released movie Drive to be much more like The Fast and the Furious based on the trailer.

...The lawsuit claimed that the producers and movie theater "promoted the film Drive as very similar to the Fast and Furious, or similar, series of movies." And yet... "Drive bore very little similarity to a chase or race action film... having very little driving in the motion picture." She's arguing that this violates Michigan's consumer protection laws. 

Oh, and to make it even better, she apparently would like to turn the whole thing into a class action lawsuit, so in case you, too, felt ripped off... This whole thing is so ridiculous, you almost wonder if it isn't a bad viral marketing campaign for Drive.

I could see a case for suing the folks who inexplicably rated Strange Brew only 6.5 stars at IMDB. What's wrong with you people? At least Rotten Tomatoes gave it a 70% fresh....

Affirmative action

A Chinese IT outsourcing company that has started hiring new U.S. computer science graduates to work in Shanghai requires prospective job candidates to demonstrate an IQ of 125 or above on a test it administers to sort out job applicants.

In doing so, Bleum Inc. is following a hiring practice it applies to college recruits in China. But a new Chinese college graduate must score an IQ of 140 on the company's test.

An IQ test is the first screen for any U.S. or Chinese applicant.

The lower IQ threshold for new U.S. graduates reflects the fact that the pool of U.S. talent available to the company is smaller than the pool of Chinese talent, Bleum said.

...

Moreover, unlike many of the larger IT offshore development companies, Bleum is focused on long-term engagements with its clients, not on one-time projects. Over time, it hopes to hire 100 to 500 U.S. workers to help support North American customers.

So says Computerworld, HT Slashdot. [Note the piece is a year old now]

So, is it differential thresholds for the Americans because they bring complementary skills that are relatively scarce in China? Or are they being hired for entirely different positions in tech support while the Chinese workers handle the harder programming problems? Tough to tell from the article.